Business leaders see sustainability as a source competitiveness but are still concerned about the risks of a ‘disorderly climate transition’, according to a new survey.
The poll published by World Business Council for Sustainable Development (WBCSD) found 9 in 10 business leaders surveyed see sustainability as a source of competitive advantage, with 89% maintaining or increasing investment.
But almost 7 in 10 also warned of growing risks of a ‘disorderly climate transition’, with almost half of businesses facing higher climate-related costs last year.
The vast majority of those surveyed (8 in 10) also called for stronger and more consistent policy now to avoid higher costs of a disorderly transition, with almost 40% willing to absorb higher near-term costs
WBCSD’s chief executive Peter Bakker said climate change is already upon us and businesses will need to get ready for the physical risks associated with it, in an interview.
Bakker added businesses are also seeing impacts through rising energy costs and abrupt policy shifts.
He told me while many sustainability professionals may have a harder time getting through to their boards, the conversation around climate impacts has now integrated itself into all company functions.
Bakker added businesses are investing in climate solutions, which are much more focussed, like electrification and regenerative agriculture.
“If you want to bring down your scope three emissions in your supply chain, then your procurement teams need to be part of that conversation,” he said.
“And if you’re worried about disruptions in your supply chain, then your risk assessment teams need to be involved. Your business continuity teams and finance departments also need to be involved,” said Bakker.
“Sustainability is moving from morality to materiality. It’s no longer ‘we’re here to save the planet’, it is about ‘this really going to impact our business’ or create new opportunities.”
“It’s no longer about targets, it’s about the transition plan which companies have and are willing to share, so we can see whether they indeed make the investments that will be required to lift these solutions to scale.”
EY’s global vice chair for sustainability, Colm Devine said businesses are increasingly recognising that the greatest threat is the cost of inaction, in a statement.
Devine added climate-related disruptions are already affecting supply chains, resource availability, operating costs and long-term growth prospects.
But he added EY’s own research shows that while nearly two-thirds of organisations have climate action plans in place, only 12% have made strong progress in developing or disclosing them.
“The challenge now is execution,” said Devine. “We are seeing a significant shift to operationalising sustainability strategies, with a clear focus on both value creation and improving enterprise resilience.
“The leaders pulling ahead are using this opportunity to reimagine the future through their strategies and business and operating models.
“No organisation can build resilience alone,” he added.
“Many of the most significant risks sit across value chains and broader systems, which is why those driving the greatest progress are increasingly engaging in ecosystem collaboration and increasingly, competitive collaboration,” said Devine.
Mars Inc’s chief sustainability officer, Alastair Child said businesses need to show acting on climate is a source of long-term economic value and growth, in a statement.
Child added businesses which actively manage their impact on people and the planet will be the most resilient and best positioned to gain a competitive advantage in the years ahead.
“At Mars, we are seeing the power of moving climate action into the core of how we operate,” said Child.
“Every business plan must deliver against greenhouse gas (GHG) and other non-financial targets. That’s why incentives for approximately 1,900 of our senior leaders are partly tied to sustainability goals.”
And Dr. Ulf Moslener, Professor of sustainable energy finance at Frankfurt School of Finance and Management said a “disorderly transition” is by definition, what happens when climate action is delayed and then has to accelerate rapidly to avoid the worst climate outcomes.
Dr. Moslener added while many firms have announced transition ambitions, comparatively few have talked about how they plan to align capital expenditure with those ambitions by systematically shifting investment away from carbon-intensive assets.
“In my view, the WBCSD survey therefore points less to a lack of coordination between governments and industry than to a lack of credible, predictable policy signals,” he said.
“Strong and consistent climate policy enables markets to coordinate investment and innovation; it is dangerous to interpret this as governments waiting for high-carbon sectors to move.
“The worrying result of the survey, a growing expectation of a disorderly transition, reflects precisely the costs of that policy uncertainty.”
